BERLIN - German election winner Friedrich Merz's conservatives and the Social Democrats (SPD) concluded preliminary talks on forming a coalition government on Saturday, promising to get tough on illegal migration, support industry and boost the economy.

Chancellor-in-waiting Merz wants to form a coalition by Easter, which falls on April 20 this year. He has warned it was "five minutes to midnight" for Europe to fend for itself against a hostile Russia, with the US under President Donald Trump no longer seen as a reliable ally.

The two parties were racing for a deal before next week when they hope to push a loosening of Germany's borrowing limits through parliament to revive growth in Europe's largest economy and boost military spending.

"There is an enormous urgency, especially with regard to the Bundeswehr (military) budget," Merz said.

In Germany, where coalitions are the norm, governments are typically formed in two phases, with parties first holding exploratory talks and then entering into formal coalition talks.

Merz's conservative CDU/CSU bloc and the SPD have haggled over issues such as migration and welfare payments, coming together after a bruising election campaign.

In his opening remarks, Merz promised tougher measures to tackle illegal migration, including by turning away people at Germany's borders and expanding border controls, promising to act along with other European Union members.

He also said Germany should be targeting 1%-2% economic growth and lower energy costs to help businesses.

"In coordination with our European neighbours, we will reject people at our shared borders, including asylum seekers," Merz said.

"We want to take all legal measures to reduce irregular migration overall. We will massively expand border controls from the first day of our joint government, and we will also significantly increase the number of rejections with these border controls," said Merz.

Merz's tougher stance on migration and security reflects a changing political landscape, where the far-right Alternative for Germany (AfD) has surged to become the country's second-largest party.

Lars Klingbeil, the co-leader of the SPD, said Germany needed more migration success stories and bring down illegal migration at the same time.

Markus Soeder, a Merz ally and powerful head of the southern state of Bavaria, said there would be reforms to welfare payments, including withdrawing money from those who can work but choose not to.

Germany's economy has contracted for two years in a row and its car industry has struggled. A joint policy paper issued alongside Saturday's statements included support for e-mobility and preventing penalties if carmakers exceed CO2 emissions standards.

Attention will also now turn to the outgoing parliament, where lawmakers will debate a 500-billion-euro ($541.60 billion) infrastructure fund and changes to state borrowing rules known as the 'debt brake' from March 13.

The Bundestag lower house will vote on the measures on March 18 before the formation of a new parliament on March 25, where both moves could get blocked by an enlarged contingent of far-right and radical left lawmakers.

The measures, which jolted markets, represent a tectonic spending shift in a country better known for its frugality and mark a rollback of rules imposed after the 2008 global financial crisis that many see as an outdated fiscal straitjacket.

Merz and the SPD need the support from the Greens party to pass the measures, and Merz on Saturday said there would be intensive talks with the Greens next week. ($1 = 0.9232 euros) 

Reuters